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Why Agencies Fail: Revisiting the Oil Spill and the MMS

This past Saturday the New York Timesprinted a fascinating interview with Chris Oynes, the former director of the gulf office of the Mineral Management Service (MMS), the agency responsible for issuing permits for off-shore drilling, including the BP/Deep Horizon drilling in the Gulf of Mexico. In it Oynes confirms many of the points I made in my earlier post in which I argued that, contrary to the prevailing media narrative, the MMS was in fact not primarily to blame for the Gulf oil spill. Instead, in expediting the permit process that allowed BP to drill at the Deep Horizon site, it was doing precisely what congressional representatives from the Gulf region were expecting it to do.

The article makes four essential points that bear repeating. First, the MMS was part of a classic iron triangle involving the oil industry that dominated the Gulf Coast economy, the elected representatives from that region who understand how many jobs the oil industry provide to local residents, and the MMS which, as with most public bureaucracies, proved acutely responsive to political incentives. In particular, MMS officials in the Gulf office felt pressure from local officials to expedite the off-shore drilling permit process and from members of Congress who sought to maximize the revenues the government received from leasing offshore drilling rights. The key point is that MMS defined the public interest in terms of sustaining the oil-based economy of the Gulf region. As the Times article puts it, “In some states, drilling has been seen as a threat to native cultures. In Cajun country, it opened a door to the middle class — even as a typical offshore schedule (two weeks on, two weeks off) let workers still fish, hunt and farm. ‘The industry didn’t destroy the old culture — it saved it,’ said Diane Austin, an anthropologist at the University of Arizona.”

That definition of the public welfare shaped the MMS’ well-defined sense of mission: to promote off-shore drilling in order to maximize government revenues. By mission, I mean a widely-shared belief among MMS members regarding what its critical task should be. In this case, MMS’s bureaucrats agreed that their primary task was to expedite off-shore drilling. They did so because Congress – which controlled MMS funding – signaled that this was what the MMS was supposed to do. “’We have 20,000 oil wells off the coast of Louisiana, and we have been drilling out there for a quarter of a century,’ Senator J. Bennett Johnston, a Democrat, said on the Senate floor. ‘The so-called danger from oil spills has simply not been proved. Not only has it not been proved, it has been disproved, and we need to get on with that drilling.’” Contrary to what some media outlets have suggested, the MMS was not a rogue agency corrupted by oil money. In fact, it was an agency that was very effective at doing what Congress wanted it to do, a point that Oynes makes repeatedly. MMS bureaucrats understood that, as the Times puts it, “[T]the agency’s Washington bosses cared more about leasing — where to do it and how much money it would bring? — than they did about the challenges of getting the oil from the sea. That was true, Mr. Oynes said, under Republican and Democratic administrations. ‘It’s almost a given with a director that they don’t know anything about drilling,’ Mr. Oynes said. “We would turn to each other and say, ‘Headquarters isn’t paying attention.’ ”

In theory, of course, the MMS was supposed to balance the economic concerns with environmental ones in considering whether to issue a permit. But most government agencies find it difficult to embrace two, somewhat contradictory missions. The MMS was no exception. The Times reports: “Both sides knew which division held the power. The law gave the head of field operations — the lead engineer — the authority to approve exploration and drilling plans. To win changes, the environmental scientists had to work through him.” Why did engineers dominate the permitting process? Because Congress’ enabling legislation essentially insured that would be the case. The authorizing legislation that defined the MMS’s mission stipulated goals that were somewhat in tension: As the Times’ article notes, “One passage calls for the ‘expeditious and orderly development’ of offshore gas and oil. The next adds a codicil: ‘subject to environmental safeguards.’” Oynes said he gave the mandates equal weight. But the reality is that the MMS was rewarded by Congress for focusing on the development of off-shore drilling – and penalized when it failed to do so. Protecting the environment was simply not very high on Congress’ priorities, at least as signaled to the MMS. According to the Times, Oynes recalled, “We would issue standard notices to environmental groups, and they would never even come to a meeting… Arguing against oil and gas isn’t going to get them anywhere.”

The reality is that MMS employees were rewarded for bringing in revenue – not for protecting the environment. In 1998 Oynes won a presidential award for leasing a record number of drilling tracts that brought in $824 million in revenue. In another case, Oynes alerted federal prosecutors when he discovered that Shell was burning natural gas rather than bringing it to shore, thus cheating the government of royalties. Shell was prosecuted and the government won $49 million in additional revenue. Given these political signals, it is not surprising that MMS bureaucrats tended to define their mission in term of permits processed, not environmental regulations enforced.

The third point is that government agencies today operate under increasing contextual constraints that are imposed by Congress with little regard for their impact on how well an agency carries out its primary mission. The MMS was no exception. It was charged with processing up to 1,000 drilling permits annually, each requiring an environmental impact statement (EIS) that could take months, or even years, to conduct. Whenever an agency is forced to address contextual constraints that impede its ability to carry out its primary mission, agency bureaucrats will devise ways to minimize the impact of fulfilling the contextual constraints. In this case, according to the NY Times, the MMS processed the EIS “in wholesale fashion, before conducting the annual lease sales.” On the other hand, the pace of technology, including the increasing depth at which drills were sunk, outran Congress’ ability to issue new environmental and safety regulations, even had it been inclined to do so. According to the Times, “One internal problem [the MMS] faced was a feeling among many staff members that swift action was impossible. One regulation had famously taken nine years to get through Washington.” In lieu of updated regulations, the MMS worked informally to police the drilling industry with the realization that without formal backing they were vulnerable to a legal challenge from the oil companies.

The fourth point is that public bureaucracies are incredibly sensitive to congressional inquiries that hint at scandal. In my earlier post I noted that there had been multiple investigations into the MMS’ operating culture – but almost none of them focused on lax environmental standards. Instead, they were driven by congressional concern that the MMS wasn’t charging enough to allow oil companies to drill in federal waters. The New York Times’ story picks up on this point. It recounts how Oynes was forced to testify before Congress regarding why his office had issued two years of contracts that essentially allowed the oil companies to avoid paying the required royalties on deep-water tracts. “The incident has trailed Mr. Oynes ever since, but most accounts omit the coda. Congress drafted the law so poorly that the federal courts invalidated the thresholds for the entire five-year program, at a cost of up to $60 billion. Congress had derided Mr. Oynes while committing the greater mistake.”

What is missing from this story? Any mention of Obama, or of any of his presidential predecessors. The reality is that presidents were only peripheral players in this policy area. Despite their constitutional charge to “take care that the laws are faithfully executed,” presidents often lack the tools to fulfill this mandate. This is particularly the case in issue areas dominated by an industry with close ties to Congress.

When government agencies fail, it is customary for the media to search for signs of corruption or malfeasance. The MMS story was no exception. Early coverage was dominated by charges of an ethically-challenged agency, its members in the hip-pocket of the oil industry. But outright corruption or ethical lapses are rarely the cause of bureaucratic failure. Instead, its roots usually run much deeper, into the mix of political and institutional incentives that determine how an agency defines its mission, and how it carries it out. To its credit the New York Times finally got this story right. When an agency is faced with contextual goals that run contrary to its primary mission, and when it becomes politically vulnerable for failing to fulfill its primary mission, it will tend to minimize or avoid fulfilling those contextual goals. In the aftermath of the Deep Horizon explosion, the MMS was abolished, and its permitting process separated from its environmental and leasing duties. The primary fault underlying the Gulf spill, however, lies not with the MMS. It lies with Congress.

4 comments

Great blog. The moving finger writes, and keeps pointing back to Congress.

Nothing will change unless the public’s conception of what serves the public interest changes — until we see government’s role as less a matter of promoting private enterprise for public benefit (although this will always be important) and instead insist that first and foremost its role is to mitigate the “social costs” (the environmental damage, the harm to human health & even life itself, etc.) that can result from business’s focus on the bottom line.

Great Post – I think your conclusion that, “[Bureaucratic failure’s] roots usually run much deeper, into the mix of political and institutional incentives that determine how an agency defines its mission, and how it carries it out” is spot on.

Often times, the media focuses on the agency/personnel involved in the action and overlooks the legislation guiding the agency. In this case, the Outer Continental Shelf Lands Act (OCSLA) and the National Environmental Protection Act (NEPA) were the guiding forces for MMS. OCSLA and its resulting regulations grant offshore drilling permits a “categorical exclusion” from the extensive environmental studies that NEPA requires (such as the EIS mentioned above). NEPA, however, is not a pro-active environmental law. It does not carry the enforcement weight of the Clean Air Act or Clean Water Act that the EPA actively protects. It simply insures that the environmental impact of an agency action is reviewed and considered publicly through notices, meetings, and environmental reports-there is no environmental standard or limitation that must be met.

The legal considerations, therefore, only make the process of offshore oil drilling more dynamic and certainly impact the course of government policy from its origin in Congress to its implementation by MMS.

Bob – This sentence of yours gets to the heart of what differentiates Democrats from Republicans: whether ones sees the “government’s role as less a matter of promoting private enterprise for public benefit (although this will always be important) and instead insist that first and foremost its role is to mitigate the “social costs” (the environmental damage, the harm to human health & even life itself, etc.) that can result from business’s focus on the bottom line.” The history of American politics is in a large sense driven by where the moderate middle of the public places themselves in relation to this divide. More often than not they have fallen on the right side of this divide. That changed, however, beginning with FDR and the New Deal. But beginning with Reagan, the moderate middle has tended once again to be suspicious of government’s ability to mitigate social costs. I wondered, with Obama’s election, whether that view would shift left of the divide once more, toward a greater appreciation of government’s ability to protect the public from capitalism’s excesses. I think the jury is still out regarding whether Obama has accomplished this shift. The worry for Democrats, I think, is that he has not fully taken advantage of what appeared to be a golden chance to enact a sea change in the public’s attitude toward government’s role.

Matt – Thanks for the input regarding the process-focused as opposed to results-oriented impact of NEPA on off-shore drilling. But what does this say about Oynes’ claim that the MMS often sought to avoid the lengthy process required to comply with EIS regulations? He seems to imply that in order to expedite the permit process, the MMS was willing to work informally with the oil companies to draw up drilling guidelines. Thoughts?